exv10w2






Exhibit 10.2




EIGHTH MODIFICATION OF LOAN DOCUMENTS AND COVENANT WAIVER




DATED AS OF AUGUST 6, 2008




by and among




Lawson Products, Inc., a Delaware Corporation




AND




BANK OF AMERICA, NATIONAL ASSOCIATION AS SUCCESSOR IN INTEREST

TO LASALLE BANK NATIONAL ASSOCIATION




 









 





EIGHTH MODIFICATION OF LOAN DOCUMENTS AND COVENANT WAIVER




     THIS EIGHTH MODIFICATION OF LOAN DOCUMENTS AND COVENANT WAIVER (this “Modification”)
is made as of the 6TH day of August, 2008, by and among Lawson Products, Inc., a
Delaware Corporation (“Lawson”), with its principal place of business and chief executive
office at 1666 E. Touhy Ave., Des Plaines, Illinois, 60018, various Subsidiaries of Lawson listed
on Schedule 6.12 to the Credit Agreement (Lawson and the Subsidiaries may be referred to
herein collectively as the “Borrower”) and BANK OF AMERICA, NATIONAL ASSOCIATION, as
successor in interest to LASALLE BANK NATIONAL ASSOCIATION, a national banking association, its
successors and assigns (“Lender”).




R E C I T A L S:




     A. Lender has heretofore made a loan (“Loan”) to Borrower in the principal amount of
Fifty Million and no/100 Dollars ($50,000,000) pursuant to the terms and conditions of a Credit
Agreement dated as of March 27, 2001 between Borrower and Lender, (the “Credit Agreement”,
all terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement,
as amended), and as evidenced by a Promissory Note dated March 27, 2001, in the principal amount of
the Loan made payable by Borrower to the order of Lender (“Note”).



     B. The Credit Agreement has been amended (i) as of August 12, 2002 to, among other things, add
a letter of credit subfacility; (ii) as of July 11, 2003 to, among other things, increase the
availability under the letter of credit subfacility; (iii) as of May 31, 2005 to, among other
things, increase the Maximum Facility, (iv) as of November 30, 2006 to, among other things, modify
the interest rate to be charged on the facility; (v) as of January 31, 2007 to, among other things,
acknowledge Lawson’s liquidation and dissolution Assembly Component Systems, Limited, a United
Kingdom corporation (“ACSL”), a Subsidiary of Lawson, and therefore release ACSL from the
facility; (vi) as of June 21, 2007 to, among other things, increase the letter of credit
subfacility and modify certain financial covenants; and (vii) as of December 26, 2007 to, among
other things, increase certain subfacilities and to modify certain financial covenants.



     C. On or about July 31, 2008, the Borrower reached a settlement agreement (the “Federal
Settlement”) with the United States of America resulting from an ongoing investigation of
certain “gifting” practices of employees and sales agents of the Borrower. Pursuant to the Federal
Settlement, the Borrower will pay the aggregate principal amount of $30,000,000 (“Federal
Settlement Amount”) to settle all claims of the United States of America relating to the
“gifting” practices. The Federal Settlement Amount will be payable by the Borrower in three (3)
annual installments with the first payment to be made in August, 2008; notwithstanding the
foregoing, the Federal Settlement Amount, and certain costs and expenses relating thereto, will be
reserved for by the Borrower for accounting purposes in the Fiscal Quarter ending June 30, 2008.



 









 





     D. Borrower has requested that the Credit Agreement be further modified in order to waive
certain covenant violations that will result from the accounting reserve of the Federal Settlement,
to modify certain financial covenants to accommodate the payment and accounting reserve of the
Federal Settlement Amount and certain other costs and expenses relating thereto, and for the other
purposes hereinafter set forth, and the Lender has agreed modify those subfacilities upon the terms
and conditions hereinafter set forth.



AGREEMENTS:




     NOW, THEREFORE, in consideration of (i) the facts set forth hereinabove (which are hereby
incorporated into and made a part of this Modification with the intent that Lender may rely upon
the matters therein recited as representations and warranties of Borrower), (ii) the Credit
Agreements by Lender to modify the Loan Documents, as provided herein, (iii) the covenants and
agreements contained herein, and (iv) for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:



     1. Waiver of Events of Default and Defaults. Borrower acknowledges and agrees as
follows:




     (a) Acknowledgment of Events of Default. That (i) as of the Fiscal Quarter
ending June 30, 2008, the Borrower has, as a result of the Federal Settlement Amount,
suffered Events of Default (x) of the Fixed Charge Coverage Ratio set forth in Section
8.13(C) and (y) of the a ratio of consolidated Total Debt to consolidated EBITDA set forth
in Section 8.13(G) (for purposes hereof, together, the “Existing Default”), and as a
result Events of Default and Defaults exist and continue to exist under the Credit
Agreement; (ii) all grace periods, if any, applicable to the cure of the Existing Default
have expired; and (iii) Lender has not previously waived in any respect their right to
demand acceleration of the Loan and/or bring remedial action against the Borrower on account
of the Existing Default.




     (b) Acknowledgment of Obligations and Borrower’ Liability Thereon. That (i)
Borrower is indebted to the Lender as of the effective date of this Modification as set
forth in the Credit Agreement; and (ii) as a result of the Existing Default the outstanding
principal balance of the Loan, if called by the Lender, would be due and payable in full,
without offset, deduction or counterclaim of any kind or character whatsoever, and is
subject to increase, decrease or other adjustment as the result of any and all interest,
fees and other reasonable charges including, without limitation, reasonable attorneys’ fees
and costs of collection, which are payable under the Loan Documents.




     (c) Acknowledgment that Obligations Continue in Full Force and Effect. That
the Note and all other liabilities and obligations of Borrower to the Lender under the Note,
the Credit Agreement and all of the other Loan Documents shall remain in full force and
effect, and shall not be released, impaired, diminished or in any other way modified or
amended as a result of the execution and delivery of this Modification except as otherwise
specifically provided herein.



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     (d) Waiver of Default.  The Borrower has requested that Lender waive the
Existing Default, and pursuant to this Modification, Lender has agreed to waive the Existing
Default. Except as and to the limited extent otherwise expressly provided herein with
respect to the Existing Default, nothing in this Modification shall be construed as a waiver
by the Lender of any promises, covenants, conditions or obligations of the Borrower under
the Loan Documents or as a waiver by the Lender of any other past, present or future
Unmatured Event of Default or Event of Default.




     (e) Release. The Borrower hereby acquits, and forever discharges the Lender
and each and every past and present subsidiary, affiliate, stockholder, officer, director,
agent, servant, employee, representative, and attorney of the Lender from any and all
claims, causes of action, suits, debts, liens, obligations, liabilities, demands, losses,
costs and expenses (including reasonable attorneys’ fees) of any kind, character, or nature
whatsoever, known or unknown, fixed or contingent, which the Borrower may have or claim to
have now or which may hereafter arise out of or be connected with any act of commission or
omission of the Lender existing or occurring prior to the date of this Modification or any
instrument executed prior to the date of this Modification including, without limitation,
any claims, liabilities or obligations arising with respect to the indebtedness evidenced by
the Note or any of the other Loan Documents. The provisions of this Section 1 of this
Modification shall be binding upon the Borrower and their respective heirs, executors and
administrators and shall inure to the benefit of the Lender, and its successors and assigns,
and shall survive the termination of the Loan Documents.



     2. Modification to the calculation of certain financial covenants for a limited
period. Borrower has reserved for accounting purposes the Federal Settlement Amount in its
Fiscal Quarter ending June 30, 2008. For purposes of calculating the Fixed Charge Coverage
Covenant set forth in Section 8.13(C) of the Credit Agreement, and the Total Debt to consolidated
EBITDA covenant set forth in Section 8.13(G) of the Credit Agreement, the Federal Settlement Amount
plus the additional sum of $5,000,000 for costs and expenses relating to the Federal Settlement
Amount shall not be classified as a reduction to EBITDA for the applicable measurement periods.
After the Fiscal Quarter ending June 30, 2008 has, on a rolling Fiscal Quarter basis, ceased being
a part of the financial covenants described above, this modification to EBITDA shall be of no force
or effect. In addition to the foregoing, and notwithstanding the modification to EBITDA, the
Federal Settlement Amount shall be added to the calculation of Total Debt for each Fiscal Quarter
of the Borrower until the entire Federal Settlement Amount has been paid in full by the Borrower to
the United States of America.



     3. Representations and Warranties of Borrower. Borrower hereby represents, covenants
and warrants to Lender as follows:




     (a) The representations and warranties in the Credit Agreement, and the other Loan
Documents are true and correct as of the date hereof.




     (b) There is currently no Default under the Note, the Credit Agreement or the other
Loan Documents and Borrower does not know of any event or circumstance which
would constitute a Default under the Note, the Credit Agreement or the other Loan
Documents.



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     (c) The Loan Documents are in full force and effect and, following the execution and
delivery of this Modification, they continue to be the legal, valid and binding obligations
of Borrower enforceable in accordance with their respective terms, subject to limitations
imposed by general principles of equity.




     (d) There has been no material adverse change in the financial condition of Borrower or
any other party whose financial statement has been delivered to Lender in connection with
the Loan from the date of the most recent financial statement received by Lender.




     (e) As of the date hereof, Borrower has no claims, counterclaims, defenses, or set-offs
with respect to the Loan or the Loan Documents as modified herein.




     (f) Borrower is validly existing under the laws of the State of its formation or
organization and has the requisite power and authority to execute and deliver this
Modification and to perform the Loan Documents as modified herein. The execution and
delivery of this Modification and the performance of the Loan Documents as modified herein
have been duly authorized by all requisite action by or on behalf of Borrower. This
Modification has been duly executed and delivered on behalf of Borrower.



     4. Conditions Precedent. The Credit Agreement of Lender to amend the Loan Documents as
set forth herein is subject to the following conditions precedent:




     (a) Lender shall have received this Modification duly executed by an authorized
individual for each entity that is a party hereto.




     (b) Lender shall have received resolutions of each Borrower approving the execution of
this Modification in form and content acceptable to Lender.




     (c) Borrower shall pay all out-of-pocket costs and expenses incurred by Lender in
connection with this Modification, including, without limitation, title charges, recording
fees, appraisal fees and attorneys’ fees and expenses.




     (d) Lender shall have received a confirmation of receipt and agreement to proceed with
the Term Sheet proposal from the Lender dated as of July 30, 2008.




     (d) Lender shall have received such other documents as may be reasonably requested by
Lender or its counsel.



     5. Miscellaneous.




     (a) This Modification shall be governed by and construed in accordance with the laws of
the State of Illinois.



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     (b) This Modification shall not be construed more strictly against Lender than against
Borrower merely by virtue of the fact that the same has been prepared by counsel for Lender,
it being recognized that Borrower and Lender have contributed substantially and materially
to the preparation of this Modification, and Borrower and Lender each acknowledges and
waives any claim contesting the existence and the adequacy of the consideration given by the
other in entering into this Modification. Each of the parties to this Modification
represents that it has been advised by its respective counsel of the legal and practical
effect of this Modification, and recognizes that it is executing and delivering this
Modification, intending thereby to be legally bound by the terms and provisions thereof, of
its own free will, without promises or threats or the exertion of duress upon it. The
signatories hereto state that they have read and understand this Modification, that they
intend to be legally bound by it and that they expressly warrant and represent that they are
duly authorized and empowered to execute it.




     (c) Notwithstanding the execution of this Modification by Lender, the same shall not be
deemed to constitute Lender a venturer or partner of or in any way associated with Borrower
nor shall privity of contract be presumed to have been established with any third party.




     (d) Borrower and Lender each acknowledges that there are no other understandings,
agreements or representations, either oral or written, express or implied, that are not
embodied in the Loan Documents and this Modification, which collectively represent a
complete integration of all prior and contemporaneous agreements and understandings of
Borrower and Lender; and that all such prior understandings, agreements and representations
are hereby modified as set forth in this Modification. Except as expressly modified hereby,
the terms of the Loan Documents are and remain unmodified and in full force and effect.




     (e) This Modification shall bind and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, successors and assigns.




     (f) Any references to the “Note”, the “Credit Agreement,” or the “Loan Documents”
contained in any of the Loan Documents shall be deemed to refer to the Note, Credit
Agreement and the other Loan Documents as amended hereby. The paragraph and section
headings used herein are for convenience only and shall not limit the substantive provisions
hereof. All words herein which are expressed in the neuter gender shall be deemed to
include the masculine, feminine and neuter genders. Any word herein which is expressed in
the singular or plural shall be deemed, whenever appropriate in the context, to include the
plural and the singular.




     (g) This Modification may be executed in one or more counterparts, all of which, when
taken together, shall constitute one original Agreement.




     (h) Time is of the essence of each of Borrower’s obligations under this Modification.



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     (i) Customer Identification — USA Patriot Act Notice. The Lender hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and the Lender’s policies and
practices, the Lender is required to obtain, verify and record certain information and
documentation that identifies the Borrower, which information includes the name and address
of the Borrower and such other information that will allow the Lender to identify the
Borrower in accordance with the Act.



(Signature Page Follows)




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     IN WITNESS WHEREOF, the parties hereto have executed this Modification dated as of the day and
year first above written



	 	 	 	 	 
	LASALLE BANK NATIONAL

 ASSOCIATION (as Lender)	 	 
	 
	 	 	 	 
	By:
	 	/s/ David Bacon	 	 
	Name:
	 	David Bacon	 	 
	Its:
	 	Vice President	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS, INC., a Delaware Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS, INC., a Georgia Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS, INC., a New Jersey Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS, INC., a Nevada Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	Its:

	 	Thomas Neri

Chief Executive Officer	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS, INC., a Texas corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS, INC., a Canadian Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LP SERVICE CO., an Illinois Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LPI HOLDINGS, INC., an Illinois Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	CRONATRON WELDING SYSTEMS, INC., a North Carolina Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 






Signature Page to Eighth Modification of

Loan Documents




 









 








	 	 	 	 	 
	DRUMMOND AMERICAN Corporation, an Illinois Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri
 

Thomas Neri
	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	ASSEMBLY COMPONENT SYSTEMS, INC., an Illinois Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	AUTOMATIC SCREW MACHINE PRODUCTS COMPANY, INC., an Alabama Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	C.B. LYNN COMPANY, an Illinois Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LP INDUSTRIAL PRODUCTS COMPANY, an Illinois Corporation (as Borrower)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	LAWSON PRODUCTS DE MEXICO, S.A. DE C.V. (as Borrower)	 	 
	By:

	 	/s/ Thomas Neri	 	 
	 

	 	 	 	 
	 

	 	Thomas Neri	 	 
	Its:

	 	Chief Executive Officer	 	 






Signature Page to Eighth Modification of

Loan Documents